LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of C++ (Marginal) and the Long-Term Issuer Credit Rating of “b+” of Kommesk-Omir Insurance Company JSC (Kommesk) (Kazakhstan). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Kommesk’s adequate risk-adjusted capitalisation, volatile operating performance, marginal business profile and exposure to country risk in Kazakhstan.
Kommesk’s level of risk-adjusted capitalisation reflects its strategy of maintaining a significant buffer above its minimum regulatory requirements and is supported by moderate underwriting leverage. Balance sheet strength also benefits from a reinsurance panel of good credit quality. A.M. Best expects risk-adjusted capitalisation to be maintained at an adequate level. However, the challenging economic environment in Kazakhstan and the company’s exposure to the vulnerable domestic banking sector represent a material downside risk. Kommesk’s risk-adjusted capitalisation improved significantly in 2015, largely as a result of an increase in retained earnings stemming from foreign exchange gains. The company’s operating performance is volatile and, due to a lack of scale, its technical results are constrained by high operating costs. The 2016 financial year was the first since 2011 in which the company recorded underwriting profit, driven by a significantly improved loss experience. However, given challenging domestic market conditions and the uncertain economic outlook, the company will find sustainable and profitable growth difficult.
Kommesk delivered significant growth in 2016, increasing its gross and net written premiums by 44% and 57%, respectively. However, its profile remained marginal, as its market share only increased to 1.9% from 1.6% in the prior year. The company’s underwriting portfolio is heavily skewed toward compulsory motor third-party liability and motor hull products, which are lines of business characterised by declining profitability. A.M Best believes that Kommesk’s lack of diversification and small size limit the company’s ability to defend its business in what are currently challenging conditions.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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